The economic effects of Brexit- evidence from the stock market

Breinlich, Holger, Leromain, Elsa, Novy, Dennis, Sampson, Thomas and Usman, Ahmed (2018) The economic effects of Brexit- evidence from the stock market. CEP Discussion Papers (CEPDP1570). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We study stock market reactions to the Brexit referendum on 23 June 2016 in order to assess investors’ expectations about the effects of leaving the European Union on the UK economy. Our results suggest that initial stock price movements were driven by fears of a cyclical downturn and by the sterling depreciation following the referendum. We also find tentative evidence that market reactions to two subsequent speeches by Theresa May (her Conservative Party conference and Lancaster House speeches) were more closely correlated with potential changes to tariffs and non-tariff barriers on UK-EU trade, indicating that investors may have updated their expectations in light of the possibility of a hard Brexit. We do not find a correlation between the share of EU migrants in different industries and stock market returns.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2018 The Authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HC Economic History and Conditions
JEL classification:	F - International Economics > F1 - Trade > F15 - Economic Integration F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
Date Deposited:	11 Jan 2019 11:42
Last Modified:	15 Sep 2023 23:45
Funders:	Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/91692

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